Victoria, County of, v. County off 15 Ont. App. R. 617; 15

Vézina v. The Queen..

Peterborough

Vosburgh v. Teator.

Wain v. Bailey....

Walker v. City of Halifax. v. Hyman.

O.R. 446

32 N.Y. 561

W.

10 A. & E. 616..

16 N.S. Rep. 371.

350

1 Ont. App. R. 345..47, 143, 279

THE NORTH BRITISH CANADIAN

INVESTMENT COMPANY, LIMITED RESPONDENTS. (DEFENDANTS)

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Fire insurance-Insurance by mortgagee-Interest insured-Payment to mortgagee-Subrogation.

Mortgagees of real estate insured the mortgaged property to the extent of their claim thereon under a clause in the mortgage by which the mortgagor agreed to keep the property insured in a sum not less than the amount of the mortgage, and if he failed to do so that the mortgagees might insure it and add the premiums paid to their mortgage debt. The policy was issued in the name of the mortgagor who paid the premiums, and attached to it was a condition that whenever the company should pay the mortgagees for any loss thereunder, and should claim that as to the mortgagor no liability therefor existed, said company should be subrogated to all the rights of the mortgagees under all securities held collateral to the mortgage debt to the extent of such payment. A loss having occurred the company paid the mortgagees the sum insured, and the mortgagor claimed that his mortgage was discharged by such payment. The company disputed this, claiming that they had a valid defence against the mortgagor by reason of breaches of a number of the statutory conditions, and were subrogated to the rights of the mortgagees. The Court of Appeal (15 Ont. App. R. 421) and the Divisional Court (14 O.R. 322) held that, the insurance company having failed to establish its defence, that the policy had been voided by the acts of the mortgagor, the latter was entitled to the benefit of the money paid by the insur

*Incorrectly reported XVIII. Can. S.C.R. 697.

**PRESENT:-Strong, Fournier, Taschereau, Gwynne and Patter

son JJ.

1889

** *April 5, 6. *June 14.

1889

IMPERIAL

FIRE INS.

Co.

บ. BULL

ance company to the mortgagees and to have his mortgage discharged.

Held, per Strong, Fournier, Taschereau and Gwynne JJ., that the judgment of the Court of Appeal for Ontario (a), should be affirmed and the appeal dismissed with costs.

Held, per Taschereau and Gwynne JJ., that the insurance effected by the mortgagees must be held to have been so effected for the benefit of the mortgagor under the policy, and the subrogation clause which was inserted in the policy without the knowledge and consent of the mortgagor could not have the effect of converting the policy into one insuring the interest of the mortgagees alone; that the interest of the mortgagees in the policy was the same as if they were assignees of a policy effected with the mortgagor; and that the payment to the mortgagees discharged the mortgage.

Held, per Taschereau and Gwynne JJ., that the company were not justified in paying the mortgagees without first contesting their liability to the mortgagor and establishing their indemnity from liability to him; not having done so they could not, in the present action, raise any questions which might have afforded them a defence in an action against them on the policy.

APPEAL from a decision of the Court of Appeal for Ontario (a), dismissing an appeal from the judgment of the Common Pleas Division (b) which affirmed the judgment of Rose J. at the trial in favour of the plaintiff.

The facts in this case were as follows:

The plaintiff borrowed money from the investment company and gave a mortgage therefor which provided that the plaintiff should insure the mortgaged premises, and should produce the receipt for the renewal premium to the company at least three days before the expiration of the insurance, failing which the investment company was entitled to insure and to charge the plaintiff with the premium.

Default having been made by the plaintiff in insuring the premises, the mortgagees obtained a policy from the appellants in the name of the plaintiff for one year, and the plaintiff having neglected to renew this insurance, the investment company obtained a renewal for a further

1889

period of one year. The policy was subject to the usual statutory conditions, but it was also issued with a special IMPERIAL agreement called the mortgage clause, which read as follows:

It is hereby especially agreed that this insurance as to the interest of the mortgagees only therein shall not be invalidated by any act or neglect of the mortgagor or owner of the property insured, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy.

It is also provided and agreed that the mortgagees shall notify the company of any change of ownership or increase of hazard (not permitted by this policy to the mortgagor or owner) on each renewal of this policy, and sooner, if the same shall come to the assured's knowledge, and shall, on reasonable demand, pay the additional charge for the same, according to the established scale of rates for the time such increased hazard may be or shall have been assumed by the company during the continuance of this insurance.

And it is further agreed that whenever the company shall pay the mortgagee any sum for loss under this policy and shall claim that as to the mortgagor or owner no liability therefor existed, said company shall at once be legally subrogated to all the rights of the mortgagee under all the securities held as collateral to the mortgage debt to the extent of such payment, but such subrogation shall not impair the right of the mortgagee to recover the full amount of his claim; or said company may at its option pay to the mortgagee the whole principal due, or to become due, on the mortgage with the interest then accrued, and shall thereupon receive a full assignment and transfer of the mortgage and all other securities held as collateral to the mortgage debt.

All the premiums were paid by the plaintiff.

A fire having occurred the insurance company paid the amount of the policy, and it was admitted that by including this sum all the mortgage money had been paid by the plaintiff. The plaintiff brought the present action asking to have it declared that the insurance company had no rights or claim to the mortgage or the monies paid by them to the loan company, and that a proper discharge of the mortgage be executed and delivered to the plaintiff; and also that an account be taken of all monies received by the defendants, the loan company, upon the said mortgage.

A number of defences, based upon breaches of the statu

FIRE INS.

Co.

v.

BULL